Q:

What is the 59 1/2 401(k) distribution rule?

A:

Quick Answer

At age 59 1/2 individuals can withdraw funds in a 401(k) that they rolled into an IRA without a withdrawal penalty tax, as About.com explains. Individuals still working can access funds for their older 401(k) plan, but they may not have access to any 401(k) plan funds at their current place of employment. Retired individuals can access their 401(k) plans at age 59 1/2 without a tax penalty.

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Full Answer

Individuals who inherit a 401(k) have to adhere to a separate set of rules regarding the withdrawal age and penalties accessed, About.com notes. This depends on whether the person who passed away was a spouse or non-spouse or the age of the 401(k) owner when he passed away.

After a person turns age 70 1/2, he must follow the minimum distribution rule and begin taking distributions from his 401(k), as About.com explains. If the person is working at the same place where his 401(k) plan is located, he needs to check with his plan administrator to determine if the same rules apply. There are some 401(k) plans that allow exceptions to the required rules if the individual has reached the necessary age of withdrawal but still continues to work and earn a living.

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